Nokia runs all the way to the bank

Building loyalty among the bankless

Nokia's move into Mobile Money seems at first to be another one of the firm's many plays in services. Having seen the importance of meshing services with devices and how iTunes supports the iPhone, or BBM the Blackberry, it's not surprising that the company has worked so hard at Ovi and maps.

For a technology company, Mobile Money is remarkably low-tech. Only the tiniest amount of bandwidth is necessary for a financial transaction, and it doesn't need to be instant - the store and forward of SMS is perfectly good enough. There are a number of technologies used in Mobile Money, including USSD, SIM toolkit, Java and plain old voice through IVR – which is great for places with an illiterate population. None of these technologies are new. The barriers to Mobile Money are business models and logistics.

So while it might seem that Mobile Money is just another ecosystem in Nokia's service strategy, look closer and you find that Mobile Money is a peculiarly good fit.

Technology might not be important but two things are: brand and distribution.

People are cautious with money, and they are slow to adopt new forms. It took the credit card twenty years to get established - five years ago buying a newspaper with anything other than cash would have been completely alien. To a person who has never encountered any kind of payment that wasn't cash or barter the idea of putting money into an account means you really have to trust the brand associated with it. According to Interbrand Nokia is the number five brand in the world - one of only two non-American brands in the top 10. The highest financial services company is American Express at 20 and the top bank HSBC at 32. This is a global ranking; in developing markets Nokia is even stronger. It's the top brand in India.

Distribution is every bit as important. For Mobile Money this means distribution of cash. A common use of Mobile Money is for people who have left a rural area to work in a city. They want to send money home. The traditional way to do this is to go to the bus station, find someone heading for their village and entrust them with the money for a fee. This is fraught with costs and risks. With Mobile Money the person in the city goes to an agent, hands over the cash and has their mobile money account credited. They can then send a text home where the recipient takes the phone to a rural agent, shows them the message along with some ID and receives cash in return.

It's quicker, safer and cheaper. The recipient doesn't even have to have a mobile money account, although in practice 40 per cent of people who receive money like this subsequently open an account. It's fantastically viral.

But the distribution problem is how does the agent get the cash? He might be a day or two away from the nearest bank. There are solutions which use wholesale master agents but where Nokia's second strength comes in is that it has a strong network for distributing phones.

It's so strong that in some countries it's fantastically hard for any other handset manufacturer to compete. Retailers pay for their stock a few days after delivery, and while rivals deliver weekly, Nokia can deliver in a day. As a result dealers can sell Nokia stock before they have to pay for it, while rival phones require capital to be tied up.

By making their phone dealers Mobile Money agents they provide a community service in the form of a bank. The phone dealer will sell phones for cash and then use that float to let Mobile Money customers cash-out. The delivery driver doesn't need to carry cash because it can be sent as a mobile payment from the dealer to the distributor. Nokia gets to promote its services by using them itself. The African operator Zain has a similar Mobile Money deal in place with Coca Cola for the Zain Zap service.

The third strength of Mobile Money for Nokia is where this happens: Of the 89 deployments of Mobile Money tracked by the GSMA, 78 are aimed at people living on under $2 a day. There are places where mobile phone penetration is massively greater than banking penetration. And they are places where the Nokia brand is hugely dominant.